Today mobile payments provider PayDragon is announcing its new Checkout feature, which lets users purchase groceries and other everyday items on the go. The company originally launched its solution in April 2012 as a mobile ordering and payment system for food vendors, offering consumer-facing Android and iOS apps and an accompanying web-based back-end platform for merchants.
PayDragon’s founders previously started Paperlinks, a QR code platform that was in startup accelerator Y Combinator’s summer 2011 class. Co-founder and CEO Hamilton Chan said they created PayDragon as a way to get what you really wanted with one click. They started with food vendors, allowing people to browse menu items, order and pay in advance, and walk over and pick up the food from food trucks and other takeout vendors. They did test runs at SXSW in March 2012 and then launched in Los Angeles in April.
Today’s new Checkout feature is a departure from their original functionality, but relates back to Chan’s goal of letting people get what they want with one click. Checkout is available in PayDragon’s existing apps, and lets users scan the barcodes of over 5,000 household items like toothpaste and potato chips, pay for the item, and get it delivered anywhere in the U.S. for free in two days. There’s no order minimum, and if a user orders several items in one day it bundles the order.
“With PayDragon 2.0 instead of working on restaurants, we’re working on household items,” he said, adding that the app will support any product you’d find in a pantry or laundry room. He said the goal of Checkout is simplicity – users don’t create a shopping cart, and right now can only find and buy items by scanning a barcode or searching, rather than browsing through a product catalogue. “We don’t distract the user by having them choose options, or upgrades, or special instructions, or even quantity,” he said. “It’s just ‘if you want this, hit Pay Now, and that’s the end of the transaction.’”
The app also integrates gamification, awarding users points for each purchase, which then translate into savings on items. Once users hit 1,000 points they get 1.5 percent off each item, and the highest reward level is five percent off each item, which users get when they hit 10,000 points.
With their existing food vendor mobile payments solution, PayDragon takes a transaction fee for every purchase. For the Checkout feature, they’re sourcing their products from California grocery chain Ralph’s, purchasing the products themselves and then shipping them out to consumers. Consumers pay the retail price, and don’t pay extra for shipping or transaction fees. Chan said that during beta testing, they found most users purchased more than one item per order, so they can spread shipping costs out. In future Chan said they plan to add a deals tab for advertisers so they can promote products. Right now Chan said they’re trying to prove out the concept, and because of their relationships with companies like Live Nation and Neutrogena through Paperlinks, they’ll be looking to form partnerships, potentially adding PayDragon barcodes to advertisements.
“We see a lot of interesting monetization channels. Could we maybe say the first 500 people to buy Crest this way, will get it for half off, and we’ll be able to charge different premiums for that type of advertising service,” Chan said. “Basically anyone that already does ecommerce we see as someone who could use PayDragon for mobile commerce.”
The Checkout feature has a long list of things it doesn’t do – it doesn’t provide instant or one-day delivery, it doesn’t let shoppers browse through products, it doesn’t let you create a cart like other grocery delivery tools like Grocery Gateway, it doesn’t provide perishable items. Chan said the sparse feature set is on purpose, that “We make these tradeoffs because what we do handle we want to handle really well,” he said.
In addition to launching Checkout, Chan said they’ll also be looking to expand their existing solution for food vendors, and they’re in talks with stadiums to allow sports fans or concert attendees to order food from their seat and pick it up during intermission.
The app is similar to another Y Combinator grad, Instacart, which has a similar focus on delivering grocery items, though it focuses on instant delivery charging $3.99 for three-hour deliveries and $9.99 for one-hour deliveries. Instacart launched in August, and has over 23,000 products in its database. Because it focuses on local delivery, it’s open from 9am-10pm daily, and only offers delivery in the San Francisco area. Other barcode scanning apps like eBay’s RedLaser are more focused on helping consumers comparison shop and get rewarded for in-store purchases, while local delivery apps like Postmates are by no means focused on household goods, though they have a much quicker delivery window.
At launch, Checkout looks to be about testing the concept and getting people on board with the idea of mobile ordering rather than providing a comprehensive mobile grocery solution. If the concept takes off with consumers, Chan will likely beef up the featured products, get consumer packaged goods companies on board, and start looking for ways to make it into a viable channel for PayDragon, rather than a mobile payments experiment.